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On Ratification of the Guarantee Agreement ("Beskyd Railway Tunnel" Project to Construct the Beskyd Tunnel) between Ukraine and the European Investment Bank (Abstract text on September 2, 2014)

"On Ratification of the Guarantee Agreement ("Beskyd Railway Tunnel" Project to Construct the Beskyd Tunnel) between Ukraine and the European Investment Bank"

Date of entry into force:

October 6, 2014

The Guarantee Agreement ("Beskyd Railway Tunnel" Project to Construct the Beskyd Tunnel) between Ukraine and the European Investment Bank (hereinafter referred to as "Agreement") was signed on May 6, 2014 in Luxembourg, and May 7, 2014 in Kyiv.

The Constitution of Ukraine (Article 85, paragraph 32) states that the Verkhovna Rada of Ukraine provides consent for Ukraine to be bound by international agreements. And, according to Article 9 of the Law of Ukraine "On International Agreements of Ukraine", the Agreement is subject to ratification.

The Law ratifies the Agreement.

According to the Financial Agreement, to finance the "Beskyd Railway Tunnel" Project to Construct the Beskyd Tunnel (hereinafter referred to as "Project") of May 7, 2014 between the European Investment Bank (hereinafter referred to as "Bank") and Ukrzaliznytsya State Administration of Railway Transport of Ukraine (hereinafter referred to as "Borrower") (hereinafter referred to as "Financial Agreement"), the Bank agreed to grant the Borrower a loan of EUR 55,000,000 (hereinafter referred to as "Loan"), subject to the terms stipulated by the Financial Agreement. The Project is an investment project in nature, and concerns an object of national importance; infrastructural development of the latter has strategic value, while its implementation facilitates development of the Ukrainian economy. The prerequisite for the first disbursement under the Financial Agreement is conclusion of the Agreement between Ukraine (hereinafter referred to as "Guarantor") and the Bank.

According to Article 2.1 of the Agreement, in the interests of the Bank, by concluding the Financial Agreement with the Borrower, the Guarantor shall irrevocably and definitively:

guarantee timely fulfillment of the Guaranteed Obligations to the Bank by the Borrower;

assume an obligation to pay to the Bank, at the first request of the Bank and without delay, the unpaid balance of each amount (principal amount, interest, other amount), whether current or future, which is payable by the Borrower to the Bank under any Guaranteed Obligation;

agree, as a principal obligation, to compensate the Bank, at the Bank's first demand and without delay, for any expenses, losses or liabilities incurred by the Bank under or in relation to the Financial Agreement as a result of any such obligation or liability that has no legal force, or loses legal force, or is contested, or is unenforceable, invalid or unlawful in respect of the Borrower, for any reason, regardless of whether the Bank was informed of such; the amount of such expenses is the amount the Bank shall have the right to collect from the Borrower in any case.

Article 2.5 of the Agreement provides that the Bank, before exercising any of the rights, authority or legal remedies granted to it in respect of the Guarantor by the Agreement or the law, shall not be obligated to:

file a claim to a court against the Borrower or any other person, and receive a court ruling on the respective matter;

prepare or file any claim or evidence of the termination or dissolution of the Borrower;

enforce or demand enforcement of any security provided in relation to any of the Borrower's obligations under the Financial Agreement.

Deferral of the Guarantor's rights is provided for by Article 2.6 of the Agreement.

According to Article 2.7 of the Agreement, amendments cannot be made to the Financial Agreement without prior written consent of the Guarantor, if the consequences of such amendments are:

extension of the maturity term for the Borrower's obligations under the Financial Agreement;

increase of the Debt amount;

change of the interest rate applied to the Loan under the Financial Agreement.

Section 3 of the Agreement provides that at the time of the Agreement conclusion, the Guarantor declares and guarantees to the Bank as follows:

the Guarantor possesses the authority and permits required under the legislation of Ukraine to provide state guarantees, such as the guarantee provided under the Agreement;

the Guarantor possesses the authority to conclude, present and serve the Agreement, and to fulfill its obligations under the Agreement;

the Guarantor's obligations under the Agreement are legitimate, effective, binding, and enforceable.

According to Article 3.4 of the Agreement, conclusion of the Agreement by the Guarantor, and fulfillment of the Guarantor's obligations under the Agreement, and of the measures under the Agreement, do not and shall not contradict:

any law, normative act, court ruling, or decree of state authorities of Ukraine applied to the Guarantor (including any restriction on the maximum external debt);

any state policy or the state structure of Ukraine;

any agreement or instrument that constitutes an effective obligation of the Borrower or in respect of any of the latter's assets.

The Guarantor and the Borrower have the authority to conclude, serve, and fulfill, and to make any necessary efforts to conclude, serve, and fulfill the Agreement and the Financial Agreement, respectively, and the measures provided under the Agreement. All permits that the Guarantor must adopt or procure in connection with concluding, serving, entry into force, and enforcement of measures provided under the Agreement, have been procured or drawn up, and have full legal effect (Article 3.5 of the Agreement).

Article 3.7 establishes that the Guarantor is a party state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed on June 10, 1958 in New York. Any arbitration ruling or resolution received under the terms of the Agreement shall be recognized and executed according to the legislation of Ukraine.

The Guarantor shall procure, adhere to the requirements of, and make the necessary effort to maintain the full legal effect and validity of all permits, approvals, licenses and consents required by the legislation of Ukraine in order to ensure lawful conclusion and fulfillment of its obligations under the Agreement, and to ensure legality, effect, and evidentiary force of the Agreement in Ukraine. The Guarantor shall ensure that the Bank's claims to it under the Agreement shall be, at all times, at least on equal terms with the claims of all its other unsecured creditors, with the exception of those whose claims prevail over any law of general application (Article 4 of the Agreement).

According to Article 5.2 of the Agreement, provisions of paragraph 3.02 (Interest on Overdue Amounts) of the Financial Agreement must be included in the Agreement, and shall constitute part of the Agreement as if they were included in the document in full, with appropriate amendments and (without restriction of the general content in the respective agreement) so that references to the Financial Agreement in that paragraph refer to the Guarantee Agreement, while references to the "Borrower" in that paragraph refer to the "Guarantor". Any interest accrued under Article 5.2 of the Agreement shall be paid by the Guarantor at the first request and immediately. For the avoidance of doubt, any interest payable under the Agreement shall not be added to any equivalent interest paid by the Borrower under the Financial Agreement, the payment of which is secured by the Guarantor under the Agreement. Any interest under the Agreement is accrued on a daily basis and calculated based on the actual number of days, and a 360-day year.

All of the Guarantor's payments under the Agreement are calculated and made (with no deductions) without any mutual settlement, offset of counter-claims, retentions or deductions for any taxes or liabilities charged by any state or financial authority according to the legislation. In such case, the Guarantor shall immediately make such payments to the appropriate state authority, provide confirmation of payment to the Bank at the latter's request, and pay additional amounts that the Bank would have received if the payment had been made after such retentions or deductions (Article 5.4 of the Agreement).

The procedure of handling received funds is determined by Article 5.5 of the Agreement.

The Bank can convert any funds received, compensated, realized, offered for disbursement, or due to be used under the Agreement, which arise with connection to exercising its rights under the Agreement, from the received currency to the currency that may be necessary for the purposes of the Agreement. Any such conversion shall be made at the exchange rate reasonably determined by the Bank (Article 6.2 of the Agreement).

Compensation of exchange differences is regulated by Article 6.3 of the Agreement.

The Agreement, its content, interpretation, and validity are regulated by international public law (Article 6.6 of the Agreement).

Article 6.7 of the Agreement is dedicated to arbitration.

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